It’s Silicon Valley vs. Telcos in Battle for Wireless Spectrum

Frontline Wireless wants a 10-MHz section of the radio spectrum, near the 700-MHz frequency, which will be sold at an FCC auction later this year.
Illustration: U.S. Department of Commerce

Apple's iPhone may be the most eagerly awaited gadget of the year, but when it finally goes on sale some time next month, only 30 percent of US mobile phone customers — those who subscribe to AT&T's wireless service — will be able to use it. Verizon subscribers might have had a shot, but executives at that carrier nixed the idea of letting an Apple device onto their network years ago. It's as if Mac owners had to connect to the internet through AT&T because their machines wouldn't work on Verizon, Comcast or Time Warner Cable.

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The wire-line internet doesn't work that way, and wireless doesn't have to either. By the end of this year, the FCC is expected to start auctioning a frequency band that could be used for a wireless network that any device — be it a cell phone, laptop, desktop, TV or toaster — would be able to connect to.

A proposal to build such a network has been presented by Frontline Wireless, a startup backed by three of Silicon Valley's biggest players: Venture capitalist John Doerr, Google angel investor Ram Shriram and one-time Netscape CEO James Barksdale. But Frontline will be bidding against behemoths like AT&T and Verizon, and whether it has a chance will be determined within the next few weeks, when the FCC sets the rules for the auction.

The spectrum that's coming up for grabs is prime stuff: A large, low-frequency band that's currently being used by UHF television stations, which have been ordered to vacate it when broadcasting goes digital in February 2009.

UHF may not be as good as VHF, which operates on even lower-frequency spectrum. But it has the ability to carry information through forests, buildings, even mountains, regardless of the weather, and that makes it ideal for broadband wireless, or for mobile-phone service. Ever wonder why AT&T and Verizon, the biggest and most successful U.S. carriers, can offer more reliable service than Sprint or T-Mobile? Because the big boys already own a large band of spectrum near the UHF band, while the little guys are stuck with spectrum that operates at double the frequency and is far less powerful as a result.

For the same reasons, a broadband wireless network operating in the UHF range would be far more powerful than the municipal Wi-Fi and WiMax networks now being built by Google, EarthLink and other companies. Such a network would be cheaper to build as well. Because radio waves in the UHF band travel much farther than the high-frequency signals used for Wi-Fi and WiMax, a single tower could cover as much as 10 times the area.

And because this will be the last auction of unused spectrum for the foreseeable future, it represents the final opportunity to create an alternative to the major carriers. The FCC grants auction winners a license to use spectrum for a number of years, but as these licenses are almost invariably renewed at no additional cost, they are effectively deeds of ownership for the winning bidders. No surprise, then, that the fight has already gotten intense.

Frontline has proposed that the FCC carve out a broad swath of the spectrum that's coming up at auction for a nationwide wireless broadband network. Under this scheme, the FCC would require the auction winner to turn its network over to public safety officers in the event of emergency and to make its network "open access," which means it would be open to any company that wants to lease it, and to any device or service that's capable of running on it, whether it's the iPhone or Skype. This, of course, is precisely the kind of network Frontline wants to build. A coalition of consumer groups is lobbying for much the same thing, as is a Google-led consortium of satellite and tech companies.

But Verizon and its partisans are having none of it. CTIA, the wireless industry trade association, sees the heavy hand of government regulation in open access and, in an equally nifty bit of double-speak, describes the current oligopoly in wireless as "competition." Scott Cleland, an influential telecom consultant who blogs reliably as a mouthpiece for the legacy telcos and their wireless offshoots, vilifies the idea behind open access as "corporate welfare for dot-com billionaires" on the theory that Google and eBay hog bandwidth at the expense of the "little guy" (who apparently suffers by getting to use Google and eBay for free).

The real target of such diatribes is Carterfone, the 1968 FCC ruling that opened the wire-line telephone networks to outside devices. Before Carterfone, AT&T — then the nation's monopoly telephone company — refused to allow consumers to attach any other company's equipment to its lines. After Carterfone, people were free to plug in all kinds of things, such as fax machines, answering machines and eventually modems and computers. Left to its own devices, AT&T would have strangled the internet in its crib, just as its offspring are trying to stifle wireless broadband.

Reed Hundt, Frontline's vice chairman and former head of the FCC during the Clinton administration, characterizes the debate as a 21st-century replay of the long-running war between the Netheads and the Bellheads — "except instead of the wire-line internet, as it was in the '80s, it's a battle for the airwaves." The goal, he argues, is the same in both cases: "Keep protocols closed, and control what you can connect to the network. You either go through the Verizon gate or you go through the AT&T gate, which means it's going to be painful and expensive for the likes of Microsoft, Google and Skype."

To Ram Shriram, the Frontline backer who sits on Google's board, the real problem isn't with big web companies today. "It's that the next Google can't be born," he says. "If I look at a business plan for mobile services, there's always the question of how they're going to reach the consumer. There are plenty of young companies seeking access to consumers, but the ability to get there is not that great."

Whose definition of "competition" the FCC buys will be apparent when it sets the rules for this auction. There've been some hopeful signs. Two weeks ago, the Commission's chairman, Republican Kevin Martin, made a tour of Silicon Valley that culminated in a breakfast at which he declared, "It is important to use the upcoming auction to make sure there are more than just two competitors."

The question is how much influence Martin can bring to bear on his fellow commissioners when they have to decide whether to go with Frontline's ideas for the auction or the CTIA's. The last time the FCC was supposed to take up this issue, at the end of April, its 10:00 a.m. meeting was delayed, delayed and delayed again — until 8:30 p.m., at which point the five commissioners opted to punt. We'll see what happens at the end of June.

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